Government is in a "desperate'' financial situation because of widespread increased spending, it has been claimed.

With all departments being asked to make cuts of around five percent, Shadow Finance Minister Grant Gibbons said he believed the leadership was heading for a cash nightmare as it tried to balance the books for next month's budget.

He warned of possible increased taxes, a higher national debt or cutting back of services, or a combination of all three.

And he cautioned that Finance Minister Eugene Cox had the power to impose cuts on Ministers who do not come up with required savings.

Speaking after it was revealed that at least one Minister, Nelson Bascome, stressed that tightening his Health Ministry belt may be difficult, Dr.

Gibbons said it looked as though Cabinet had made a collective decision to look for savings, but individual Ministers were not happy with it.

"It is a very embarrassing situation, now individuals are effectively going against the Cabinet decision. They have put themselves in this hole. I hope it won't be the taxpayers who pay.'' The Shadow Minister stressed that whatever the outcome was, it would be a bitter pill for the country to swallow.

"I just think they are in a desperate situation right now, and I don't think it will be pretty,'' Dr. Gibbons said.

And three Ministers -- Mr. Bascome, Home Affairs Minister Paula Cox and Education Minister Milton Scott, could be hauled over the coals for speaking publicly about the situation.

Last night, Environment Minister Arthur Hodgson, Development Minister Terry Lister, Works and Engineering Minister Alex Scott, and Transport Minister Ewart Brown were keeping their predicaments private.

Gibbons: Govt. finances in `desperate' state Mr. Hodgson confirmed his department had been asked to make cuts, but could not say how much. He said they would be making every effort to comply.

He said: "We are working together to see what we can do. Whenever my colleagues ask me to do something, I try to get it done.'' Mr. Scott remained tight-lipped about demands made on his departmental purse strings. He said it would be inappropriate to answer as it may involve disclosing details to go before Cabinet.

Mr. Lister and Dr. Brown refused to talk about the upcoming budget.

But Tourism Minister David Allen confirmed his department had begun looking to "make efficiencies''.

"Like other Ministries we will certainly look at the request and try to be as creative as we can,'' Mr. Allen said. "It's important to recognise that the tourism and international business industries earn the finances that finance the other activities within Government.

"It's important the Tourism Ministry has the resources, i.e. the tools, to be able to attract visitors to Bermuda,'' he said. "Having said that we must make sure we are getting the best possible return. We are looking in all our cost centres to see if we are getting the value for money.'' Mr. Allen explained that one possible area of cost cutting was by encouraging the private sector to increase their support of events, while the Ministry concentrates on direct marketing and promotion.

The Ministry would continue to assist, but just not on as great a scale, he said.

"We're asking them to sharpen their pencils as much as we are,'' he added.

Dr. Gibbons claimed the situation had arisen because of the long list of projects the Government promised, and after various departments had made requests for increased money.

Expenditure in this year, he said, was up by $35 million on the previous year.

Capital projects totalled $58 million and supplementary estimates for cash topped $14 million.

He predicted additional requests for money to the Legislature in the coming year as the Government tried to live up to its promises.

"I think they were stung by the fact they did so little in their first year, they changed that and went into spending overdrive,'' he said. "They are really in a deep hole.'' If the required cuts were not made, he said Mr. Cox had the power to impose reductions on departments.

Alternatives could be raising taxes or increasing the borrowing limit, which Dr. Gibbons said he believed could be nearing the $185 million legal ceiling.

"He is either pretty close to that or has exceeded it with various projects the Ministries want to do next year.''